Bank of America and Microsoft team up to test blockchain in trade finance

Bank of America and Microsoft have announced a joint effort to create and test blockchain applications in the trade finance sector.

As part of the collaboration, Bank of America will work directly with Microsoft Treasury, the division responsible for managing transactions related to corporate treasury trading activities and strategic business investments and acquisitions, to create a blockchain system to facilitate transactions between businesses.

In a statement, Microsoft Executive Vice President and CFO Amy Hood said the move is expected to reduce financial risk.

Hood said:

“Businesses around the world – including Microsoft – are undergoing digital transformation to grow, compete and become more agile, and we believe blockchain has great potential to drive this transformation.”

The company said it is testing how the blockchain platform can facilitate the letter of credit process and will release a demonstration product at a banking symposium in Geneva this week.

The announcement comes as a number of major financial institutions are looking to blockchain to better facilitate trade finance and supply chain processes, with the R3CEV banking consortium also recently conducting important trials.

Because such transactions involve multiple parties, many of whom will use forms and paper processes, this use case has been seen as an ideal area for the application of blockchain technology.